Dematerialization

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Dictionary Meaning and Definition on 'Dematerialization'

Wikipedia Meaning and Definition on 'Dematerialization'


In economics, dematerialization refers to the absolute or relative reduction in the quantity of materials required to serve economic functions in society. In common terms, dematerialization means doing more with less. This concept is similar to ephemeralization as proposed by Buckminster Fuller.

Dematerialization is the counterargument to the idea that economics is only about 'more is better.' The idea that more is better, a common activist argument which likens economic logic to the logic of a cancer cell, ignores the differences between inputs and outputs, and it ignores the ratio of inputs to outputs.

In finance and financial law, dematerialization refers to the substitution of paper-form securities by book-entry securities. This phenomena is ancient, since in many small firms that cannot afford printing secured paper-form securities, the securities are often held in a book-entry form, under the control of an attorney who acts as a notary to certify the existence of the securities, as well as their authenticity. Today, dematerialization concerns more and more listed companies in the US (where the process has begun in the sixties) and now in the European Union, where dematerialized securities represent often more than 99% of the securities listed on regulated markets. However, this recent phenomena of dematerialization of securities issued by large firms is mostly undertaken via Central Securities Depository, a national or regional institution holding the notary function, such as the DTC in the US, which itself entrusts banks and investment firms to act as intermediaries between issuers and investors for the custody of these securities. Therefore, dematerialized securities are often referred as intermediated securities, in particular by the Unidroit convention on substantive rules for intermediated securities.

[See more about Dematerialization at Dictionary 3.0 Encyclopedia]

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